European natural gas prices are headed for a third consecutive day of declines, with Citigroup Inc. analysts seeing sluggish demand and high inventories keeping a lid on prices, according to Bloomberg.
Benchmark front-month futures fell as much as 5% on Friday, putting the market on track for a weekly loss. The moves are providing some respite after abrupt price jumps earlier this week, spurred by fears that hot weather in some parts of the continent could cause demand to spike.
So far, gas consumption has stayed well below historical averages after last year’s energy crisis forced companies and households to curb usage. That, along with higher-than-usual inventories, is providing a sense of security even though the region still remains vulnerable to short-term supply disruptions.
“A more meaningful demand increase between now and the start of winter back to average levels pre-2022 does not look likely to happen,” Citi analysts including Maggie Xueting Lin wrote in a note. Stronger renewable generation is also contributing to the weak demand for the fuel, they said.
Wood Mackenzie analysts say that even unexpected delays in Norway’s field works in August and September are unlikely to move prices much. European storage levels are already over 84% full.
The heat wave blanketing southern Europe is also expected to lose strength, after temperatures exceeded 40C in parts of Italy, Spain and Greece, causing wildfires and disrupting daily lives. That could help ease the need for electricity for cooling.